Iran Sanctions: Implications of Implementation Day

Implementation Day, which is 16th January 2016, marks the day on which it was verified that Iran implemented its nuclear-related commitments of the JCPOA. The Club and International Group are examining what this actually means in reality for Iran’s oil, gas, shipping, petrochemicals, insurance and financial sectors, and importantly for those owners/operators wishing to engage business with Iran.

The US has broadly lifted “nuclear-related secondary sanctions” which had targeted non-US companies/persons dealing with Iran’s energy, shipping, financial, shipbuilding and automotive sectors, Iran's port operators, providers of related insurance, Iran's trade in gold and other precious metals, and trade with Iran in graphite and raw or semi-finished metals, such as aluminum, steel and coal.

However, not all of the EU and US sanctions against Iran are being lifted. There are still residual asset freezes in place against individuals and entities linked to Iran’s ballistic missile program and human rights violations. In fact, despite the announcement over the weekend the US has imposed fresh sanctions on Iranian companies and individuals over a recent ballistic missile test. The new sanctions prevent 11 entities and individuals linked to the missile programme from using the US banking system. Furthermore, the US “primary” sanctions will continue to prohibit US persons in general from carrying out business with Iran outside the few exempted areas such as food, medicine and the newly liberalised aviation sector. Banks are therefore likely to be weary in clearing US dollars transactions for Iran-related business for the foreseeable future.

Anyone proposing to engage in business in Iran will still be required to carry out proper due diligence on their counterparts before concluding contracts.

The following checklist, reproduced courtesy of Holman Fenwick Willan, identifies some of the issues that should be considered:

Are any US persons involved?

Do any payments need to be made in US dollars?

Does the transaction involve the supply of any US origin goods or goods with US content?

Is your Iranian counterparty, or any other party involved in the transaction (e.g. a port operator or agent) still included on an applicable sanctions list (or is owned or controlled or acting on behalf of such an individual or entity)?

Have you checked that the cargo is no longer subject to any restrictions?

Can you document and evidence the checks which you have carried out?

Do you have any pre-existing banking covenants or other contractual warranties or restrictions (e.g. trading limits or policy restrictions) which limit your ability to trade with Iran?

Have you spoken to your bank and confirmed that they are prepared to support the transaction in respect of payment?

Have you checked with your insurers and confirmed cover?

We will of course provide further details and guidance from the International Group once available.